Economic commentary from David Oser, formerly chief economist at ShoreBank

March 11, 2012

I Dreamed I Saw Joe Hill Last Night

Joe Hill ain't dead, he says to meJoe Hill ain't never diedWhere working men are out on strikeJoe Hill is at their side

There was a time in America when the labor union movement was a powerful force for social change. Work in the newly industrialized nation was long, poorly-paid, and dangerous. One of the first great labor causes in the Massachusetts textile mills of the 1830s was the reduction of working hours to ten a day, six days a week. Pay was as low as hours were long, and workers were at the mercy of the owners of industry. When the Panic of 1893 reduced demand for his luxurious sleeping cars, George Pullman cut workers' wages an average of 25-33%. He neglected, however, to drop the rents in his company town where the workers were forced to live. But the truly horrendous part was how many workers were injured, maimed, and killed. In mining, deaths averaged 6,600 between 1900 and 1904. The worst years for fatalities among railway workers were 1889 (8,500), 1895 (6,450), and 1901 (7,350).

Today, work is short, reasonably well-paid, and safe. The average work week for all workers has hovered around 34 hours for years; in manufacturing, it's typically a bit above 40 hours. Last month, production and non-supervisory employees earned an average $19.64 an hour ($40,851 annualized), a figure that increases almost every month. The biggest improvements have been in safety. In 2010, the last year for which data is available, total work fatalities were 4,547, a mere three-thousandths of a percent, and almost 1,000 were caused by traffic accidents.

Who can we thank for these great achievements? Organized labor, of course, with its great heroes and martyrs, like Joe Hill, framed for murder in Utah in 1914 and executed because he was a member of the radical union, Industrial Workers of the World.

But in modern America, labor unions are nearly as dead as Joe Hill. Labor statistics are a bit dicey until the 1970s, and comparisons are difficult over time. Nevertheless two trends stand out. First, union membership increases in good economic times and falls in bad times. Second, membership rates track closely with manufacturing as a percentage of the economy. At the turn of the 20th century, there were fewer than 800,000 unionized workers in America, but Labor's ranks grew steadily. Thanks to World War I production, trade union membership nearly doubled between 1915 and 1920, from about 2.5 million to 5 million. This latter figure was about 19% of the non-farm workforce. Moreover, in 1920, 47% of payroll employment was generated by manufacturing, a figure that has never been approached since. Union membership declined during the '20s, hitting bottom at the depth of the Depression, when about 12% of the workforce was unionized and unemployment reached 25%. The World War II boom was a great stimulus to unions. As early as 1940, nine million workers, more than a quarter of the non-agricultural workforce, were in unions. By war's end membership had swelled to 15 million, and it continued to climb in the postwar boom period. In 1955, nearly 17 million workers were unionized, representing fully a third of the workforce. The number of union members topped out in 1978 at 22.9 million, but, with the growth of the workforce, the percentage of unionized labor was back down to 26% and falling. Not coincidentally, the percentage of manufacturing payroll employment was also falling, from a steady 41% in the 1930s through the 1950s, to 38% in 1960, 33% in 1970 and 28% in 1980. By 1983, following the terrible recession of the early '80s, the union membership rate was down to 20.1% and the number of unionized workers was back down to 17.7 million.

The downward trend has never been halted. Last year, only 14.7 million workers were union members, just under 12% of the non-farm workforce. But, and it's a very large "but", a mere 6.9% of private sector workers (7.2 million) were in unions, compared to 37% of public-sector workers. In no private sector occupation did union representation reach more than 25%. The following chart shows a selection of private section union representation in traditionally organized occupations:

Industry

Number Employed

Union Members

Percent of Employed

Mining

780,000

56,000

7.2

Construction

6,244,000

874,000

14.0

Durable Goods Manufacturing

8,530,000

871,000

10.2

Non-durable Goods Manufacturing

5,070,000

553,000

10.9

Transportation

4,335,000

887,000

20.4

The drop in union membership is nothing compared to the drop in union militancy. In the 1950s, there were 3,517 work stoppages involving a thousand or more workers each. Almost 16 million workers were involved in one time or another. By the 1980s, comparable figures were 831 and five million. In the first decade of this century, there were 201 work-stoppages involving 1.3 million workers. Last year there were precisely 19 work-stoppages of 1,000 or more workers. The percentage of estimated working time lost was less than .005%. Of the 19 stoppages, just four lasted more than a month, and one of those was the National Football League.

Nor should we imagine that workers have nothing to complain of. In 2009, when there were only five major work-stoppages involving 13,000 workers, there were more than 10,000 mass layoffs (defined as 50 or more workers) affecting 1.2 million workers in the manufacturing sector alone. In all there were more than 28,000 mass layoffs that year, resulting in more than 2.8 million unemployment insurance claims.

Some might say that unions have no one to blame but themselves. Organized crime and corruption were endemic in many big unions, especially the Teamsters where leaders like Dave Beck and Jimmy Hoffa were little more than gangsters. The unions also failed to cement their ties with the Democratic Party. Indeed, pro-Vietnam "Hard-hats for Nixon" turned many 1960's liberals permanently anti-union. Also, the ties between Big Business and Big Labor have long seemed too cozy. Others might blame Big Government, which has co-opted Labor's issues with all sorts of laws and programs, most notably the Fair Labor Standards Act, Minimum Wage laws, the Occupational Health & Safety Act, Workers Compensation, and many more. The strongest argument, though, is that organized labor is just a poor fit for a service and information economy. Today, the entire goods producing sector employs a mere 13.8% of the total workforce and 16.5% of the private sector workforce. Manufacturing employs just 9%.

And yet, there's something wrong with this picture. In every recession over the previous 30 years, it has taken progressively longer for employment to recover. The economy is still something like five million jobs from its pre-Recession peak, and an 8.3% unemployment rate is nothing to brag about. It makes me wonder. Why haven't unions been able to make more inroads among private, service sector white-collar workers? Nearly half of all local government employees are unionized, and more than a third of state and federal employees. Why isn't there a bank tellers union? Or a union for telemarketers? Or temporary workers?

Back in 1909, an economist named Herbert Croly provided a rationale for organized labor that holds even truer today:

A simple and poor society can exist as a democracy on a basis of sheer individualism. But a rich and complex industrial society cannot so exist; for some individuals, and especially those artificial individuals called corporations, become so very big that the ordinary individual…cannot deal with them on terms of equality. It therefore becomes necessary for these ordinary individuals to combine in their turn, first in order to act in their collective capacity through that biggest of all combinations called the government, and second, to act also in their own self-defense, through private combinations, such as farmers' associations and trade unions.

It's impossible to know if fewer Americans would be unemployed today if the Labor movement was still vibrant, but I suspect so. More generous unemployment benefits, more federal stimulus to rebuild infrastructure, and greater support for career education are Labor causes. The AFL-CIO website boasts, "Working people's power is our strength in numbers. That's how we win change at City Hall and pass legislation at the state level and in Congress to create jobs, boost the economy, ensure quality education for our children and much more." Unfortunately, as we have seen, "strength in numbers" is exactly what Labor no longer has. There was a time when Labor was an effective opponent of the power of corporations. There was a time when it stood firm in defense of the ordinary worker. But those times are gone. I'm afraid old Joe Hill really is dead.

Recommended Reading

David Deutsch: The Beginning of Infinity: Explanations That Transform the WorldWith the possible exception of Ray Kurzweil's The Singularity Is Near, this is the most optimistic book I have ever read. If you choose to read the book, you will understand, among much else, what optimism really is. But, I have to warn you, the book is long and very difficult, being a combination of quantum physics and philosophy. I would not suggest it, if I didn't think it was extremely important, and, especially for younger persons, life-changing and life-affirming in the best senses of those over-used terms.

Liaquat Ahamed: Lords of Finance: The Bankers Who Broke the WorldThis a must-read for anyone interested in history and economics. Ahamed's history is sound and his analysis of how people--even experts--really make economic decisions is exactly on the mark.